Innovation and Efficiency Initiative - Financing Instruments and Modalities
The Innovation and Efficiency Initiative (IEI) is a central element in ADB's overall Reform Agenda. In August 2005, new financing instruments and modalities were introduced under IEI. Some were implemented on a pilot basis from September 2005 to August 2008 (IEI: Pilot Financing Instruments and Modalities). The status of each new modality is as follows:
- Multitranche Financing Facility . Mainstreamed into ADB's financing operations in July 2008 because of high demand and portfolio size as well as the assessment that the instrument has created efficiency in implementing sovereign lending through shorter processing times and cost savings.
- Non-sovereign Public Sector Financing Facility. Pilot period was extended to 31 August 2011. Although this facility is fully aligned with Strategy 2020, more time and transactions are required to evaluate both its ability to meet client needs and the efficiency and effectiveness of its delivery.
- Refinancing Facility. This facility, as defined in the pilot paper of 2005, was discontinued.
- Local Currency Loan Product was introduced into core ADB lending operations in August 2005 as an alternative to US-dollar loans based on the London interbank offered rate.
- Syndications and risk-sharing. Policy and operating frameworks were developed further since the introduction of the IEI, and were mainstreamed into ADB's operations.
The new financing instruments are intended to provide ADB clients and operational teams with additional alternatives to help finance development in large individual projects and longer-term investment programs arising out of sector road maps. They are not meant to replace ADB's existing instruments. They expand the alternatives available within ADB's portfolio of development finance solutions, while preserving its credit standing.
The instruments will allow ADB improve services to existing and new clients seeking development finance. They are specifically designed to:
- provide a financing plan for a program of investments in an integrated package or series of related projects intended to achieve an overall development outcome
- efficiently mobilize additional financial resources, including domestic savings, and international finance
- minimize currency mismatches at the project and client levels
- reduce transaction costs
- provide refinancing to fundamentally sound projects with high development impact but weak financing plans.
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